Warburg Pincus has closed its first real estate opportunity fund on $1.2 billion (€940 million). Although this is its first dedicated vehicle, the private equity firm has invested more than $1 billion in the asset class over the past 20 years.
The fund will be global in scope and will stick with the type of real estate investments that the firm has made out of its other funds, says Michael Profenius, Warburg's real estate chief. However, a growing transaction volume and an increase in the firm's proprietary deal flow tipped the balance in favor of raising a dedicated vehicle.
The real estate fund will look to place about half its capital in Asia, a quarter in North America and a quarter in Europe, but ”there really are no hard and fast percentages,” says Profenius. “We will redirect capital as needed.”
“We are really taking advantage of Warburg Pincus' global resources and our footprint,” he adds. “Where we are focused is where Warburg Pincus has already been.”
Much of the fund's strategy will be driven by demographics, Profenius says. Warburg has looked to capitalize on burgeoning cities in China and India and growing economies and rising consumerism in Central and Eastern Europe, while in the US it has looked at sectors like senior housing, fueled by aging Baby Boomers ready for retirement.
Institutional investors provided capital for the fund, including several limited partners who have previously invested with Warburg Pincus, such as GE Asset Management.
Warburg has put capital to work across sectors, with investments spanning homebuilding, retail, senior housing, lodging, self-storage, land development and real estate services in North American, Europe and Asia.
Earlier this month, Warburg formed a $200-million joint venture with the Bascom Group to invest in non-performing loans and distressed properties in the US. Recently, the firm also acquired an 18 percent stake in Spanish homebuilder Grupo Pinar. In July, Warburg Pincus invested approximately $45 million in Lemon Tree Hotels, a New Delhi-based hotel company. The previous month, the firm announced the acquisition of Brandywine Senior Care, an operator of assisted living facilities, for an undisclosed amount.
The real estate fund represents the 12th fund the firm has raised over its four decades of operation.
Morgan Stanley targets $8bn
Morgan Stanley Real Estate has its sights set on raising as much as $8 billion (€6 billion) for its next opportunity vehicle, according to a Bloomberg News report citing Morgan Stanley officials. If the firm hits the target, it would far surpass the record set by The Blackstone Group, which raised $5.3 billion for its latest real estate vehicle earlier this year. A spokesperson for Morgan Stanley said private placement rules prevented the firm from either confirming or denying the report. Morgan Stanley Fund VI International would be invested outside the US, with three-fourths slated for developed markets and the remaining quarter tagged for investments in emerging markets, according to the report. It would come close on the heels of the firm's most recent international fund, Morgan Stanley Fund V International, which closed on $4.2 billion earlier this year.
Dune closes on $727m
Dune Capital Management has closed its inaugural real estate opportunity fund on $727 million (€580 million). Dune was formed by Goldman Sachs veterans Dan Neidich, Steve Mnuchin and Chip Seelig. The new fund will be global in scope and will target investments in real estate assets, portfolios, joint ventures and operating companies. Last year, Dune broke ground on the $1.8-billion Cosmopolitan Resort & Casino, a two-tower complex including a casino, a hotel and condominiums on the Las Vegas Strip. The firm was also part of the KKR-led consortium that acquired GMAC Commercial Holding, a real estate financial services company, earlier this year.
Fortress to go public
New York-based Fortress Investment Group has filed to go public on the New York Stock Exchange, seeking to raise as much as $750 million (€588 million) through the listing of Class-A shares, representing 10 percent of the company. Fortress' five principals will control the remaining 90 percent of the firm through Class-B shares, according to the firm's S-1 filing with the Securities and Exchange Commission. The firm, which manages $26 billion in assets, also controls two publicly traded companies under the “Castle” brand that invest primarily in real estate and real estate debt instruments. Fortress has been one of the largest and most active investors in the private equity real estate space in recent years, spending significant amounts of capital in the German residential sector and, in the US, recently acquiring ski resort operator Intrawest.
NYSTRS commits $500m
The New York State Teachers' Retirement System made $500 million (€390 million) in commitments toward real estate recently, funneling $100 million each into international funds run by RREEF, Citigroup, European Investors and LaSalle Investment Partners. It also made commitments to USAA US Industrial REIT II and CPI Capital Partners North America. The $90-billion system currently has an 8 percent target for real estate.